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					Your Retirement Benefits
TE ACHERS' AND STATE EM PLOY EES'
       RETI REM ENT SYSTEM




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                              North Carolina Retirement Systems



J A N U A RY, 2 0 0 8 D E PA R T M E N T O F S TAT E T R E A S U R E R , R A L E I G H , N O R T H C A R O L I N A 2 7 6 0 3 - 1 3 8 5
                       TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




                                      State of North CaroliNa
                                 DepartmeNt of State treaSurer
                                        retiremeNt SyStemS DiviSioN



      riCharD h. moore                                                       miChael WilliamSoN
         State treaSurer                                                        Deputy treaSurer




                                  To the Members of the Teachers’ and State Employees’
                                  Retirement System:

                                  It is a great pleasure to present you with your new employee
                                  booklet Your Retirement Benefits. The information in this sum-
                                  mary describes the retirement benefits you can expect to receive
                                  as a member of the Teachers’ and State Employees’ Retirement
                                  System. This summary includes topics such as when you qualify
                                  for benefits and how much you can expect to receive.

                                  To help you build a sound financial future, the State helps you
                                  reach your retirement goal by sharing the cost of the Retirement
     System with you. Your retirement benefit is a part of your compensation earned during
     your active working career that has been deferred until the time you stop working. When
     combined with your Social Security benefits and personal savings, the Retirement System
     provides you financial security for your later years.

     In addition, the Disability Income Plan is a financial benefit the State provides for you in the
     event you become unable to work before you are eligible to retire. This benefit plan is also
     described in this summary.

     I think you will find Your Retirement Benefits a helpful tool in understanding the benefits of
     the Teachers’ and State Employees’ Retirement System. I encourage you to read this entire
     document and to share this information with your family.



     Sincerely,




     Richard H. Moore

     State Treasurer




Your Retirement Benefits                                                              JANUARY, 2008
                                     TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Your Retirement Benefits
Details On: ............................................Are On Page:                Creditable Service And Service Purchase
                                                                                    Provisions ................................................................. 13
Your Retirement System Benefits In Brief ..............2                               Rollovers To Purchase Service Credit ........................17
Becoming A Member Of The System ..................... 2                             Transferring Service And Contributions Between
                                                                                    Systems ....................................................................18
Who Pays For The System .......................................3
                                                                                    Refund Of Contributions ........................................18
Tax-Deferred Savings Advantages ......................... 3
                                                                                       Interest ....................................................................... 18
How Your Benefit Is Calculated .............................. 4
                                                                                    Applying For And Receiving Monthly Benefits ....19
How To Qualify For Benefits................................... 4                       Retirement Application Process ................................ 19
  Becoming Vested.......................................................... 4          Your First Monthly Benefit...................................... 20
  Service Retirement (Unreduced Benefits) ................. 4                          Post-Retirement Increases......................................... 20
  Early Retirement (Reduced Benefits) ........................ 4
                                                                                    Retiree Health Insurance Coverage.......................20
  Disability Retirement ................................................. 5
  Reciprocity Between Retirement Systems................. 5                         Income Tax ...............................................................21
  If You Leave The System Before Retirement ............. 5                            Retirement Benefits ................................................... 21
                                                                                       Death Benefits .......................................................... 23
How Your Beneficiaries Are Protected ....................6
                                                                                       Refunds ..................................................................... 23
  Survivor’s Alternate Benefit ......................................... 6
  Death Benefit ............................................................... 6   Reemployment After Retirement .......................... 24
Example Of How A Benefit Is Calculated ................7                            Important Information To Remember ................... 26
  At Service Retirement ................................................. 7         Disability Income Plan Of North Carolina .............27
  At Early Retirement ......................................................8       Administration And Funding ..................................36
  Early Retirement Percentages ................................... 8                How To Contact Us ................................................ 38
  Examples Of Benefits Paid.......................................... 9
Retirement Benefit Payment Plans..........................9
  Maximum Payment.................................................... 10
  Payment Options ....................................................... 10
  How The Payment Options Work............................ 12




                                                                                    DISCLAIMER: The availability and amount of all benefits you
                                                                                    might be eligible to receive is governed by Retirement System
                                                                                    law. The information provided in this handbook cannot alter,
                                                                                    modify or other wise change the controlling Retirement System
                                                                                    law or other governing legal documents in any way, nor can
                                                                                    any right accrue to you by reason of any information provided
                                                                                    or omission of information provided herein. In the event of a
                                                                                    conflict between this information and Retirement System law,
                                                                                    Retirement System law governs.




 JANUARY, 2008                                                                                                               Your Retirement Benefits                        1
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




    Your Retirement System Benefits In Brief
    n   Automatic membership for eligible employees.         n   Survivor monthly income if you die in active
        See below.                                               service with 20 years of credit regardless of age;
    n   You and the State pay the cost of retirement             or after age 60 with five years of membership.
        benefits. See page 3.                                    See page 6.
    n   Monthly payments at retirement based on your
                                                             n   Several payment options available to continue
        salary, age, and years of credit. See page 4.            income to your beneficiary following your death
                                                                 after retirement. See pages 10, 11, and 12.
    n   Unreduced retirement benefit at age 65 with five
        years of membership, or at age 60 with 25 years
                                                             n   Death benefit paid to
        of credit, or at any age with 30 years of credit;        your beneficiary if you
        reduced benefit after age 50 and 20 years of             die in active service after
        credit, or at age 60 with five years of member-          one year of membership.
        ship. See page 4.                                        See page 6.
    n   A right to a reduced benefit at age 60 after five    This section just highlights
        years of membership, regardless of whether you       the System. The following
        are working. See page 4.                             pages describe it in detail.
    n   Disability Income Plan benefits. For short-term
        benefit provisions, see page 29. For long-term
        benefit provisions, see page 31.


    Becoming A Member Of The System
    You become a member of the System on your date           n   an Agricultural Extension Service employee and
    of hire if you are:                                          a member of the Federal Employees’ Retirement
    n   a permanent full-time teacher or employee                System, you may not join this System.
        of a State-supported board of education or
                                                             You can get more details about the alternate
        community college,
                                                             systems from your employer.
    n   a permanent employee of the State (or any of its
        agencies, departments, bureaus, or institutions)     Shortly after your employer enrolls you in the
        and work at least 30 hours per week for nine         System, the Retirement System will send you
        months per year, or                                  a Form 2C, “Designating Beneficiary(ies) for
    n   a permanent employee of a charter school             Retirement System Contributions and the Death
        whose board has elected to participate in the        Benefit,” to complete. On the Form 2C, you will
        Retirement System, and work at least 30 hours        be asked to name your beneficiary(ies) to receive
        per week for nine months per year.                   a refund of your contributions and a death benefit
                                                             if you die before retirement. You can change
    However, if you are:                                     your beneficiary(ies) at any time by completing
    n   a faculty member, administrator, or other            another Form 2C, available from your employer
        eligible employee at a State institution of higher   or the Retirement System.
        education or a community college president,
        you may join an optional retirement program,
        instead of the System, or


2    Your Retirement Benefits                                                                  JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Who Pays For The System
You, and the State, and the investment earnings on      On and after July 1, 1982, your contributions
total contributions pay the cost of providing your      to the Retirement System are tax-sheltered
retirement benefits.                                    for federal and North Carolina income tax
                                                        purposes.
Your share of the cost, which is automatically
deducted from your paycheck, is 6% of your com-         The State bases contributions on the calculations
pensation. Your compensation includes all salaries      prepared by an actuary. The State contribution
and wages paid to you, from public funds, which you     rate for the 2007-2008 fiscal year is 7.83% of all
earn at your covered job while working for the State.   members’ salaries to pay for the benefits for you
                                                        and other members.



Tax-Deferred Savings Advantages
On and after July 1, 1982, special tax advantages       The example below assumes you are married,
apply to the contributions you make to the              earn $30,000 a year, have four people in your
Retirement System because they are made                 family, and contribute 6% of your salary to
on a before-tax basis. This means that your             the Retirement System. The amount of tax you
contributions are deducted from your pay before         actually pay will depend on current tax rates and
taxes are calculated. As a result, your taxable         your own financial situation.
income is lowered and the amount of annual taxes
you pay is less than if you made contributions on
an after-tax basis.



                                                        After-Tax    Tax-Deferred
                                                        Savings        Savings

                         Eligible Pay                   $30,000        $30,000
                         Tax-Deferred Savings                  0         -1,800
                         Taxable Income                 $30,000        $28,200
                         Federal Income
                         Tax Withholding*                 -1,882         -1,612
                         North Carolina State
                         Income Tax Withholding*          -1,259         -1,133
                         After-Tax Savings                -1,800              0
                         Take-Home Pay                  $25,059        $25,455
                         Increased Take-Home Pay                          $396
                         *Estimated




 JANUARY, 2008                                                                    Your Retirement Benefits   3
                            TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




    How Your Benefit Is Calculated
                                                           Creditable service means any period during
               Your annual retirement benefit
                                                           which you contribute to the System, provided you
                  is based on this formula:                do not withdraw your contributions. In addition, if
           1.82% of “average final compensation”           you have unused sick leave, were in military service,
                           TIMES                           or worked out-of-state in related governmental
          years and months of “creditable service.”        employment, special rules may apply in determining
                                                           creditable service. See pages 13 through 17 for
                                                           more details.
    Average final compensation means the average
    of your salary during your four highest-paid years     If you left the System
    in a row. If your four highest-paid years in a row     and withdrew any of
    include a final payment for unused vacation leave      your own contributions,
    and/or prorated longevity, your average final          you may restore your
    compensation may be increased by the extra             creditable service by
    payment(s). (Final payments, if any, for unused        making a lump sum
    sick leave or reimbursements for expenses are not      payment, as outlined on
    includable in your average final compensation.)        page 14.




    How To Qualify For Benefits
    Becoming Vested                                        Early Retirement (Reduced Benefits)
    You become vested in the Retirement System             You may retire early with a reduced retirement
    once you have completed a minimum of five years        benefit after:
    of membership service. This means that you are
                                                           n   you reach age 50 and complete 20 years of
    eligible to apply for lifetime monthly retirement
                                                               creditable service, or
    benefits based on the formula, and the age and
    service requirements described in this handbook,       n   you reach age 60 and complete five years of
    provided you do not withdraw your contributions.           membership service.
    You may also be eligible for retiree health coverage
                                                           Your early retirement benefit is determined by
    as described on page 20.
                                                           the same formula as a service retirement benefit
    Service Retirement (Unreduced Benefits)                multiplied by a reduction percentage based on
                                                           your age and/or service at early retirement. Since
    You may retire with an unreduced service               your benefits may be paid over a longer period of
    retirement benefit after:                              time than if you waited until you were eligible for
    n   you reach age 65 and complete five years of        service retirement, they will be reduced. The table
        membership service,                                on page 8 shows the effect these reductions would
    n   you reach age 60 and complete 25 years of          have on your benefit.
        creditable service, or
    n   you complete 30 years of creditable service, at
        any age.

4    Your Retirement Benefits                                                              JANUARY, 2008
                         TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Disability Retirement                                     Reciprocity Between Retirement Systems
After attaining certain service requirements, you         Any credit you may have in the Legislative, Judicial,
may be eligible for short-term disability and/or          or Local Governmental Employees’ Retirement
long-term disability benefits from the Disability         Systems may be counted along with your
Income Plan of North Carolina as described on             credit in this Retirement System for the purpose
pages 27 through 34. However, if you earned and           of determining your eligibility for a reduced or
maintained five or more years of membership ser-          unreduced benefit. However, only your creditable
vice with the State Retirement System prior to July       service in this System will be used in computing
1, 1982, you are eligible to receive disability retire-   the amount of your benefit in this System, and
ment benefits that are based in part on the amount        creditable service in any other system will be used
of service that you would have earned if you had          in computing benefits from that System.
been able to remain in service until age 65, instead
of benefits from the Disability Income Plan.              If You Leave The System Before Retirement

In addition, if you earned and maintained five or         Even if you leave before service or early retirement,
more years of membership service with the State           you may still receive a benefit. You are entitled to
Retirement System prior to January 1, 1988, you           apply to receive a benefit once you meet eligibility
are eligible to receive disability retirement benefits    requirements if you leave for any reason after you
that are based in part on the amount of service           have completed five years of membership service,
that you would have earned if you had been able to        provided you do not withdraw your contributions.
remain in service until you would have otherwise          See page 20 for information regarding retiree
been eligible for an unreduced service retirement         health insurance coverage.
benefit, instead of benefits from the Disability
                                                          Your benefit is determined by the formula in effect
Income Plan.
                                                          on the effective date of your retirement. It is based
In either case, if you earned and maintained five         on your average final compensation and years of
or more years of membership service with the              creditable service at that time. You can apply
State Retirement System prior to January 1, 1988,         for deferred payments to begin when you reach
and subsequently become disabled, you will have           age 60.
the opportunity to elect to receive benefits from
                                                          If you have at least 20 years of creditable service
the Disability Income Plan or to receive disabil-
                                                          when you leave, you can apply for early payments
ity retirement benefits from the State Retirement
                                                          starting at age 50, however, your benefit is reduced
System.
                                                          because you may receive payments for a longer
If you are eligible for and you elect to receive          period of time than if you waited until you were
disability retirement benefits, your payment under        eligible for service retirement.
the Maximum Allowance will be calculated using
                                                          If you leave the System before you have five years
the same formula as a service retirement benefit.
                                                          of membership service, the only payment you can
(See pages 10 and 11 for descriptions of retirement
                                                          receive is a refund of your contributions. See page
payment plans.) Under disability retirement, you
                                                          18 regarding a refund of contributions.
may choose any payment option except Option
4. If you choose a survivorship option, it will be
calculated using disability reduction percentages.



 JANUARY, 2008                                                                     Your Retirement Benefits       5
                            TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




    How Your Beneficiaries Are Protected
    Although the System’s primary purpose is to             your death. If you do not want your beneficiary to
    provide retirement income, it recognizes that           have this choice of receiving a retirement allow-
    some employees will not live to enjoy their             ance provided by Option 2, you should so indicate,
    retirement benefits. So, it provides a death benefit    in writing, to the Retirement System.
    that protects your beneficiary should you die
    before retirement.                                      Death Benefit
                                                            If you die while still in active service (while being
    In addition, your beneficiary will receive a refund     paid salary) after one year as a contributing mem-
    of your contributions (with interest, if applicable).   ber, your beneficiary will receive a single lump
    More details on refunds appear on page 18. If you       sum payment. The payment equals the highest 12
    meet certain age and/or service requirements, a         months of salary in a row during the 24 months
    Survivor’s Alternate Benefit may be paid instead of     before you die, but no less than $25,000 and no
    the refund of contributions if you have named only      more than $50,000. This benefit is also paid if
    one principal beneficiary. See below.                   you die within 180 days of the last day for which
                                                            you were paid salary. It is in addition to any other
    If you die after retirement, depending on the
                                                            benefits to which you may be entitled.
    payment option you chose, your beneficiary may
    receive income following your death. See pages 10
    through 12.

    Survivor’s Alternate Benefit
    Provided you have not retired, if you have named
    one principal beneficiary for the refund of your
    contributions and die while in active service (while
    being paid a salary or within 180 days after salary
    payments cease) after:
    n   completing 20 years of creditable service (not
        including credit for unused sick leave) regard-
        less of age, or
    n   reaching age 60 with five years of membership
        service,

    the principal beneficiary named to receive a refund
    of your contributions and interest may choose
    to receive a monthly benefit for life instead of a
    refund of contributions. The Survivor’s Alternate
    Benefit does not apply if you have named two or
    more persons as principal beneficiaries or your
    estate as beneficiary, or if you have retired. The
    benefit equals the same monthly amount you
    would have been entitled to under Option 2 had
    you retired on the first of the month following




6    Your Retirement Benefits                                                               JANUARY, 2008
                       TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Example Of How A Benefit Is Calculated
To give you an idea of how benefits are calculated,       Because Mary has over 30 years of creditable
let us look at some examples. Assume an employee,         service at retirement, she receives her basic benefit
Mary Benson, who works on a 10 month per year             of about $18,929 annually, or approximately
basis, retires at age 60, with 32 years and two           $1,577 monthly, for the rest of her life under
months of creditable service. As we go through the        the maximum payment, with monthly payments
steps to figure Mary’s benefit, write in your own         ceasing at her death.
figures for an estimate of your benefit.
                                                          In addition, Mary may also be eligible for Social
                                                          Security benefits as early as age 62.




     At Service Retirement                                  Mary                       You
     Step 1
     Add your salary during your four                      $30,600                 $
     highest-paid years in a row.                           31,700
                                                            32,900
                                                          + 34,000
                                                          $129,200                 $
     Step 2
     Divide Step 1 by four to determine                    $32,300                 $
     your average final compensation.

     Step 3
     Multiply Step 2 by .0182 to apply                     $32,300                 $
     retirement formula.                              x      .0182                 x    .0182
                                                           $587.86                 $
     Step 4
     Determine creditable service.                    32.2 years
     (see pages 13 through 17)

     Step 5
     Multiply Step 3 by Step 4 to determine             $587.86                    $
     your annual retirement benefit.                  x    32.2
                                                      $18,929.09                   $
     Step 6
     Divide Step 5 by 12 to get                        $1,577.42                   $
     monthly maximum payment.




 JANUARY, 2008                                                                     Your Retirement Benefits       7
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




    At Early Retirement                                       Assume, however, that Fred is age 59 instead of
    Now let us look at an employee, Fred Wise, who            age 61. With 24.25 years of creditable service,
    works on a 12 month per year basis. Assume when           his early service retirement reduction percentage
    Fred retires at age 61, he has:                           is .80 instead of .88. In this case, Fred receives
                                                              a maximum payment of about $11,404 a year, or
    n   average final compensation of $32,300, and            about $950 a month, unless he chooses a specific
    n   24 years and three months of creditable               retirement payment option. His payment will start
        service.                                              at age 59 and continue for the rest of his life.

    Here is how we calculate his benefit:                     In addition, Fred may also be eligible for Social
        $    32,300 (average final compensation)              Security benefits as early as age 62.
        x     .0182
                                                              Early Retirement Percentages
        $    587.86
        x     24.25 (creditable service)                      If you are between ages 60 and 65, with less than
                                                              25 years of creditable service, your early service
        $ 14,255.61
                                                              retirement benefit will be reduced to the following
    Now apply the early retirement reduction                  percentages.
    percentage from the chart below.
                                                                   If you are               You receive this
        $ 14,255.61                                              this age when               percentage of
        x       .88 (percentage at age 61)                       payments start               your benefit
        $ 12,544.94
                                                                         64                      97%
    In this case, Fred receives a maximum payment                        63                      94%
    of about $12,544 a year, or about $1,045 a month,                    62                      91%
    unless he chooses a payment option. His payment                      61                      88%
    will start at age 61 and continue for the rest of his                60                      85%
    life.

                                                Creditable Service
                        29      28      27      26     25    24         23      22     21      20
                 Age
                 59     95%     90%     85%     80%     80%      80%    80%     80%    80%     80%
                 58     95%     90%     85%     80%     75%      75%    75%     75%    75%     75%
                 57     95%     90%     85%     80%     75%      70%    70%     70%    70%     70%
                 56     95%     90%     85%     80%     75%      70%    65%     65%    65%     65%
                 55     95%     90%     85%     80%     75%      70%    65%     60%    60%     60%
                 54     95%     90%     85%     80%     75%      70%    65%     60%    55%     55%
                 53     95%     90%     85%     80%     75%      70%    65%     60%    55%     52%
                 52     95%     90%     85%     80%     75%      70%    65%     60%    55%     50%
                 51     95%     90%     85%     80%     75%      70%    65%     60%    55%     50%
                 50     95%     90%     85%     80%     75%      70%    65%     60%    55%     50%

    If you are between birthdays when payments start, the reduction will be adjusted proportionately.

8    Your Retirement Benefits                                                                JANUARY, 2008
                                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




If you are between ages 50 and 59, with less                               Examples Of Benefits Paid
than 30 years of creditable service, your early                            The following chart shows the approximate
retirement will be reduced to the percentages                              monthly benefit paid at various salary levels,
shown in the table on page 8.                                              depending on age and creditable service.

                                                                           Of course, these are only examples. Your own
                                                                           benefit is calculated individually and depends on
                                                                           your age, creditable service, and average final
                                                                           compensation.



                                                  Monthly Retirement Benefit Under Maximum Payment

                                           Age         50          55          60           N/A           N/A
                                        Service        20          28          25            30           40
           Average Final Compensation




                                        $50,000       $758      $1,911       $1,895       $2,275        $3,033
                                         40,000        606       1,528        1,516        1,820         2,426
                                         35,000        530       1,337        1,327        1,592         2,123
                                         30,000        455       1,146        1,137        1,365         1,820
                                         25,000        379         955          947        1,137         1,516
                                         22,000        333         840          834        1,001         1,334
                                         20,000        303         764          758          910         1,213
                                         18,000        273         687          682          819         1,092
                                         16,000        242         611          606          728           970
                                         14,000        212         535          530          637           849
                                         12,000        182         458          455          546           728
                                         10,000        151         382          379          455           606




Retirement Benefit Payment Plans
When you retire you have to decide which monthly                           Before you select a payment plan, you should
payment plan to select. Your decision will be                              know that, on average, each payment plan is
personal and should take into account your needs                           mathematically equal to the other plans. That is,
during retirement and the needs of a dependent,                            each payment plan is calculated so that the total
if any, after your death. Neither the payment plan                         value of the plan you select is the same as the
selected by a co-worker nor the one selected by the                        value of the other plans if you and the beneficiary
largest number of retirees should have any effect                          (if any) you name to receive a monthly payment,
on your personal decision.                                                 live your expected lifespans.




 JANUARY, 2008                                                                                     Your Retirement Benefits      9
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     You should first decide if you need to select a        Maximum Payment
     type of payment plan that provides for a monthly       When you retire on a service retirement
     payment to a beneficiary after your death. If you      allowance, your basic benefit is the maximum
     do not select such a plan, all of your retirement      payment and is calculated under the formula on
     benefit will be used to provide you with a lifetime    page 7. If you retire early, your maximum payment
     monthly payment that ceases at your death.             is calculated using the same formula and then
     There is a Guaranteed Refund feature of                reduced for early retirement. In either case, unless
     your retirement benefits which provides that           you choose a payment option, you will receive
     the total amount paid out after your retire-           your maximum payment for as long as you live. All
     ment will not be less than the amount of your          monthly payments stop at your death.
     contributions and interest, regardless of which        Payment Options
     retirement plan you select. Should your death and
     the death of the beneficiary named to receive a        Instead of the maximum payment, you can choose
     monthly payment, if any, occur before the total        one of the following payment options.
     of all monthly payments equals the amount of
                                                            If you elect to provide a monthly payment to a
     your contributions and interest, the unrecovered
                                                            beneficiary after your death by choosing Option
     portion of your contributions and interest will be
                                                            2, 3, 6-2, or 6-3, you give up some of your retire-
     paid in one lump sum to another beneficiary(ies).
                                                            ment benefit while you are living. The amount
     Payments made to purchase additional creditable
                                                            you give up is placed in reserve to be paid to one
     service after retirement are also covered by the
                                                            beneficiary after your death. (A beneficiary for a
     Guaranteed Refund provisions. You may name one
                                                            monthly benefit cannot be named as beneficiary for
     or more beneficiaries for the Guaranteed Refund
                                                            the Guaranteed Refund.) The amount your retire-
     provision, and you may change this beneficiary(ies)
                                                            ment benefit is reduced depends on the amount of
     as often as you desire. Of course, any benefi-
                                                            your maximum payment benefit, your age, and the
     ciary named for the Guaranteed Refund cannot be
                                                            age of your beneficiary.
     named as beneficiary for a monthly benefit.

     You may not change the payment plan you
     select once you cash a retirement check or                                Option 2
     after the 25th of the month following the                        100% Joint And Survivor
     month your first check is mailed (whichever is         You receive reduced monthly payments for life.
     earlier) except under the following conditions:        After you die, your beneficiary receives the same
                                                            amount monthly for life.
     n   if you select a payment option that provides
         a monthly benefit to your spouse as named
         beneficiary after your death (i.e., Option 2, 3,                      Option 3
         6-2, or 6-3) and later become divorced from                   50% Joint And Survivor
         that spouse, or                                    You receive reduced monthly payments for life.
     n   if you are rehired in a position covered by the    After you die, one-half of your payment continues
         Retirement System and contribute to your new       to your beneficiary for life.
         account for at least three years.




10    Your Retirement Benefits                                                              JANUARY, 2008
                      TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




                    Option 4                                              Option 6
           Social Security Leveling                            Modified Joint And Survivor
You receive larger monthly payments than you          You receive reduced monthly payments under
would otherwise be entitled to receive, until you     a combination of Option 2 and the maximum
become eligible for Social Security at age 62.        payment, or under Option 3 and the maximum
Beginning at age 62, your monthly payments            payment. Your death, or the death of your
will be reduced to an amount that is less than        beneficiary, affects monthly payments as fol-
what you would otherwise be entitled to receive.      lows:
Nevertheless, your reduced retirement payments
                                                      n   Option 6-2 — Under a combination of Option
after age 62 plus your allowance from the Social
                                                          2 and the maximum payment, your death enti-
Security Administration should be approxi-
                                                          tles your beneficiary to receive a monthly pay-
mately the same amount as the inflated payment
                                                          ment for life in the same amount as you received.
you received from the Retirement System before
                                                          However, if your beneficiary dies before you
age 62. However, the actual amount of your
                                                          do, your monthly payments are increased
retirement payments both before and after age
                                                          to the amount payable under the maximum
62 will be based on the estimate of benefits you
                                                          payment.
provide to our office from the Social Security
Administration prior to your retirement. All          n   Option 6-3 — Under a combination of
monthly payments cease at your death.                     Option 3 and the maximum payment, your
                                                          death entitles your beneficiary to receive
The reduction in your monthly retirement                  a monthly payment for life of one-half the
payments after age 62 allows the Retirement               amount you received. However, if your ben-
System to recover the inflated amounts you                eficiary dies before you do, your monthly
received before age 62. Therefore, on the                 payments are increased to the amount payable
average, the inflated amounts received before age         under the maximum payment.
62, together with the reduced amounts received
after age 62, are equal in value to the other
                                                      Under Options 2, 3, 6-2, and 6-3, you may
retirement plans over your life expectancy.
                                                      name only one beneficiary to receive a monthly
Under Option 4, any percentage increase you           survivor payment after your death. You may not
are granted in your retirement payments before        change your survivor beneficiary after you
age 62 will be applied to the inflated benefit you    retire except under the following conditions:
are receiving at that time; however, upon reach-      n   if you named your spouse as survivor
ing age 62 your retirement payments will be               beneficiary and later become divorced from
reduced to the original amount promised after             that spouse,
age 62, plus the percentage increases (not the dol-   n   if you return to employment covered under
lar amount of increases) granted before age 62.           this Retirement System and contribute to
For additional information regarding Option 4             a new retirement account for at least three
and Social Security, see pages 19 and 26.                 years, or
                                                      n   if you chose Option 2 or 3 at retirement and
                                                          designated your spouse as survivor beneficiary
                                                          and this spouse dies before you, and you



JANUARY, 2008                                                                   Your Retirement Benefits      11
                               TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




        remarry, you may name your new spouse                         How The Payment Options Work
        as your beneficiary within 90 days of your
                                                                      John Murphy has earned a service retirement ben-
        remarriage under the same option you chose
                                                                      efit under the maximum payment plan of $1,000
        at retirement. This redesignation must be
                                                                      a month. Unless he chooses a payment option, he
        properly filed with the Retirement System
                                                                      will receive $1,000 each month for life with all
        within 120 days of remarriage. Your new
                                                                      monthly payments ceasing at his death.
        benefit will be reduced on the basis of your age
        and the age of your spouse at the time of the                 But let us assume he wants to share his benefit
        change. The benefit payable to you will be the                with his wife, Pam. Pam is 51 when John retires
        benefit you received prior to the death of your               at 57 after 30 years and three months of creditable
        original spouse, additionally reduced in order                service. The table below shows how much John
        to cover your new spouse as beneficiary.                      and Pam would each receive monthly under vari-
                                                                      ous payment options.
     Under Options 6-2 and 6-3, if your survivor
     beneficiary dies before you do, you may not name                 Of course, the actual amounts of the payment
     another.                                                         options you can choose are based on many factors,
                                                                      such as your age, your beneficiary’s age, and when
     Your new beneficiary designation will be
                                                                      payments start. Before you retire, you will receive
     effective on the first day of the month in which it
                                                                      an estimate of the actual amounts payable to you.
     was made, and it will provide retirement benefits
     that are mathematically equal to the retirement
     benefits that were in effect prior to your new
     beneficiary designation.




          To John                                                                      To Pam After John’s Death
          Maximum
          $1,000 monthly                                                                                      $0.00
          Option 2
          $840.40 monthly                                                                          $840.40 monthly
          Option 3
          $913.30 monthly                                                                          $456.65 monthly
          Option 4*
          $1,388.89 up to age 62, $753.89 thereafter                                                          $0.00
          Option 6
          With Option 2:                                                                           $832.10 monthly
          $832.10 monthly; if Pam dies before John, he receives $1,000 monthly thereafter
          With Option 3:                                                                           $454.20 monthly
          $908.40 monthly; if Pam dies before John, he receives $1,000 monthly thereafter


          *Assumes John’s primary Social Security benefit is $635 a month at age 62.




12    Your Retirement Benefits                                                                       JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Creditable Service And
Service Purchase Provisions
Your benefit at retirement is based, in part, on        If you are not eligible for free credit under these
your creditable service. In addition to the years       rules , you may be eligible to buy credit for your
and months you contribute to the System, credit-        first period plus later required periods of active
able service also includes:                             duty by making a lump sum payment. Your cost
                                                        will depend on when you became a member and
Sick Leave. Sick leave earned monthly under a           when you make your payment.
duly adopted policy and for which you would
receive full salary if you were absent from work        If you became a member on or before July 1, 1981,
on account of sickness, counts as creditable            and have contributed to the Retirement System for
service. Sick leave which was converted from excess     five years but less than 10 years, your cost will
vacation leave in accordance with State law is also     be equal to the full actuarial liabilities created
creditable. One month of credit is allowed, at no       on account of the additional credit purchased.
cost to you, for each 20 days of your unused sick       However, as soon as you have contributed to this
leave when you retire. One more month is allowed        Retirement System for 10 years, there immediately
for any part of 20 days left over, provided the         follows a three-year period during which your
remaining portion is at least one hour.                 cost will likely be lower than at any other
                                                        time. If not paid during that three-year period,
Sick leave is used to increase your creditable          your cost will again become equal to the full
service, but sick leave cannot be used to meet          actuarial liabilities created on account of the
the minimum qualifications for a deferred benefit       additional credit purchased.
or the Survivor’s Alternate Benefit. You may use
your sick leave to complete 30 years of service,        If you became a member after July 1, 1981, you
regardless of age; 25 years of service after age 60;    must have contributed to this Retirement System
and 20 years of service after age 50. Please note       for five years. Your cost will be equal to the full
that sick leave does not count toward eligibility       actuarial liabilities created on account of the
for retiree health coverage. See page 20 for            additional credit purchased.
information regarding retiree health coverage.
                                                        If your service is creditable in another retirement
Your employer will certify the amount of sick leave     system, your ability to buy credit in this System
you have on your retirement application.                may be restricted.

Military Service. Your periods of active duty in        Your employer and
the United States military up to the time you were      the Retirement System
first eligible for discharge count as creditable ser-   have application forms
vice at no cost to you if you were a teacher or State   which contain more
employee when you entered the military, and:            information.
n   you returned to employment as a teacher             Withdrawn Service.
    or State employee within two years after your       If you ever received
    earliest discharge date, or                         a refund of your
n   you returned to employment as a teacher or          contributions from:
    State employee at any time after your discharge
                                                        n  this    Retirement
    and completed at least 10 additional years of
                                                        System,
    service as a contributing member.

 JANUARY, 2008                                                                  Your Retirement Benefits      13
                              TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     n   the Local Governmental Employees’ Retirement           Your cost, which must be paid in a lump sum,
         System, or                                             will be calculated using the withdrawn service
     n   the former Law         Enforcement       Officers’     purchase provisions in the System under which
         Retirement System,                                     you are purchasing the service credit.

     you may be eligible to make a lump sum payment             Your employer and the Retirement System
     and restore to this System the creditable service          have application forms which contain more
     you lost when you received your refund. Before             information.
     you are eligible to pay for this service, you must be
                                                                Out-Of-State Service. If you have performed
     rehired and contribute to this System for five years
                                                                out-of-state public employment, you may be
     or have a combination of five years of currently
                                                                eligible to buy credit for that service. Credit that
     creditable service in the Judicial, Legislative, Local
                                                                can be purchased must have been with:
     Governmental, or this Retirement System.
                                                                n   another state or governmental subdivision of a
     Effective July 1, 2001, your cost, which must be               state,
     paid in a lump sum, will be equal to the amount of
                                                                n   a federal, overseas dependent or military
     contributions withdrawn, plus interest at the rate
                                                                    dependent school,
     of six and one-half percent compounded annually
     from the year of withdrawal to the year of repay-          n   the Public Health Service,
     ment, plus an administrative fee of $25.                   n   the Merchant Marine (if you were also in the
                                                                    Naval Reserve), or
     Other Withdrawn Service Purchase Provisions.
                                                                n   the International Cooperation Administration
     If you ever received a refund of your contributions
                                                                    or Agency for International Development, while
     from:
                                                                    on an approved leave of absence.
     n   the Consolidated Judicial Retirement System,
                                                                If you became a member on or before July 1, 1981,
     n   the Legislative Retirement System, or
                                                                and have contributed to the Retirement System for
     n   the Local Governmental Employees’ Retirement           five years but less than 10 years since completing
         System,                                                your out-of-state service, your cost will be equal to
                                                                the full actuarial liabilities created on account of
     you may be eligible to make a lump sum payment
                                                                the additional credit purchased. However, as soon
     and restore the creditable service to the System
                                                                as you have contributed to the Retirement System
     from which it was withdrawn. Before you are
                                                                for 10 years, there immediately follows a three-year
     eligible to pay for this service, you must have five
                                                                period during which your cost will likely be lower
     years of currently creditable service in this
                                                                than any other time. If not paid during that three-
     Retirement System or in the Judicial, Legislative,
                                                                year period, your cost will again become equal to
     or Local Governmental Retirement Systems, or
                                                                the full actuarial liabilities created on account of
     have a combination of five years of credit in any
                                                                the additional credit purchased.
     of these Systems. Service purchased under this method
     may be used in determining your eligibility for benefits   If you became a member after July 1, 1981,
     in this System. However, only your creditable              you must have contributed to the Retirement
     service in this System will be used in computing           System for a total of five years with at least one
     the amount of your benefit in this System, and             year of membership service after completing your
     creditable service in any other system will be used        out-of-state service. Your cost will be equal to the
     in computing benefits from that System.

14    Your Retirement Benefits                                                                   JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




full actuarial liabilities created on account of the     educational leave or interrupted service for educa-
additional credit purchased.                             tional purposes is six years.

If your service is creditable in another retirement      Your employer and the Retirement System have
system, your ability to buy credit in this System        application forms which contain more information.
will be restricted. If you are eligible, you may
buy credit at the rate of one year of out-of-state       Temporary Local And State Service. You may
service for each year of service under this System.      purchase credit for full-time temporary local and
You may purchase a maximum of 10 years of                State government employment if you have com-
out-of-state service credit.                             pleted five years of service as a contributing
                                                         member after the temporary employment. Your
Your employer and the Retirement System have             cost will be a lump sum payment equal to the full
application forms which contain more information.        actuarial liabilities created on account of the
                                                         additional credit purchased.
Educational Leave. If you have interrupted service
or approved leave of absence for educational             Your employer and the Retirement System have
purposes prior to July 1, 1981, credit may be            application forms which contain more information.
purchased if you returned to service as a contributing
member within 12 months after completing an              Probationary Or Waiting Period Service. You
educational program; have contributed to the             may purchase credit for a period of service you
Retirement System for at least 10 years after            performed with a unit of the Local Retirement
returning to service; and, make a lump sum payment       System, during which time you were in a
equal to the full actuarial liabilities created on       probationary or employer imposed waiting period
account of the additional credit purchased.              status between your date of employment and date
                                                         of membership in the Retirement System. In order
If you have interrupted service or approved leave of     to be eligible to purchase this credit, the employer
absence for educational purposes after July 1, 1981,     must have revoked its probationary or waiting
credit may be purchased if regular employee and          period policy. Your cost will be a lump sum payment
employer contributions are paid by the 15th of the       equal to the full actuarial liabilities created on
month following the month for which service              account of the additional credit purchased.
credit is allowed. If contributions are not made by
the 15th of the month, a penalty of 1% per month         Your employer and the Retirement System have
shall be assessed to the total costs. In addition,       application forms which contain more information.
unless you return to service as a contributing
                                                         Workers’ Compensation Leave. If you are
member within 12 months after completion of
                                                         granted a leave of absence to receive benefits under
your educational program and contribute to the
                                                         the North Carolina Workers’ Compensation Act,
Retirement System for at least three more years
                                                         you may make a lump sum payment to purchase
(except in the event of death or disability), your
                                                         credit for the period of time you received those
contributions will be refunded and the service
                                                         benefits.
credits canceled. If your employer will not make
the employer contributions, you may make them            If your leave ended before January 1, 1988, your
in addition to the employee contributions.               cost will be a lump sum payment that includes the
                                                         total amount required to cover the employee and
Regardless of when the educational program was
                                                         employer funding. If your leave ends on or after
completed, the maximum allowable credit for


 JANUARY, 2008                                                                   Your Retirement Benefits       15
                            TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     January 1, 1988, the cost will be shared by you        Service With The Federal Government. You
     and your employer. For any leave ending on or          may purchase credit for service you performed on
     after July 1, 1983, if payments are not made within    a full-time basis with the federal government, if
     six months of your return to service, a penalty of     you have completed five years of service as a
     1% per month shall be assessed to the total cost.      contributing member of this Retirement System
                                                            since performing the federal service. In order to be
     Your employer and the Retirement System have           eligible to purchase this credit, your federal service
     application forms which contain more information.      must not be creditable in any other retirement
                                                            system. Your cost will be a lump sum payment
     Part-Time Local And State Service. You may
                                                            equal to the full actuarial liabilities created on
     purchase credit for part-time local and State
                                                            account of the additional credit purchased.
     government service if you have completed five
     years of service as a contributing member. If your     Your employer and the Retirement System have
     purchase of credit for part-time service makes         application forms which contain more information.
     you eligible to retire and you do so immediately
     after your purchase, the five years of service as      Public Community Service. If you worked on
     a contributing member may be performed at              a full-time basis with a public community service
     any time before and/or after completion of the         entity in North Carolina that was funded entirely
     part-time employment. Otherwise, the five years        with federal funds, and are not otherwise eligible
     of service must be performed since completion          for credit for that service, you may be eligible to
     of the part-time employment. Your cost will be         purchase credit for it in this Retirement System.
     a lump sum payment equal to the full actuarial         To do so, you must have completed five years of
     liabilities created on account of the additional       service as a contributing member since completing
     credit purchased.                                      the public community service employment. Your
                                                            cost will be a lump sum payment equal to the
     Your employer and the Retirement System have           full actuarial liabilities created on account of the
     application forms which contain more information.      additional credit purchased.
     Service With A Local Governmental Employer.            Your employer and the Retirement System have
     If you worked on a permanent, full-time basis          application forms which contain more information.
     with a unit of local government, and are not oth-
     erwise eligible for credit for that service, you may   Omitted Service. You may purchase credit for
     purchase credit for it in the State Retirement         a period of eligible service to a participating
     System, if you have completed five years of service    employer, if during that period of eligible service,
     as a contributing member. In order to be eligible      you should have been a contributing member of the
     to purchase this credit in the State Retirement        State or Local Governmental Retirement System
     System, the service must not be creditable in the      but were omitted from contributing membership
     Local Governmental Employees’ Retirement               through error.
     System. Your cost will be a lump sum payment
     equal to the full actuarial liabilities created on     The cost to purchase this type of service depends
     account of the additional credit purchased.            on when the omitted membership occurred.
                                                            The cost, which must be paid in a lump sum
     Your employer and the Retirement System have           payment, will likely be lower if you purchase
     application forms which contain more information.      the omitted service as soon as possible after the
                                                            omission.


16    Your Retirement Benefits                                                               JANUARY, 2008
                       TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Your employer and the Retirement System have          Extended Illness Leave. If your membership
application forms which contain more information.     service was interrupted by one or more periods of
                                                      leave without pay due to extended injury or illness,
Service As A Member Of The General                    excluding maternity leave, you may purchase
Assembly. You may purchase credit for service as      credit for each separate period during which you
a member of the General Assembly if that service      lost at least two months of membership credit. To
is not creditable in the Legislative Retirement       be eligible, you must be a contributing member at
Fund or the Legislative Retirement System. Your       the time of purchase and have at least five years
cost will be a lump sum payment equal to the full     of service as a contributing member. Your cost will
actuarial liabilities created on account of the       be a lump sum payment equal to the full
additional credit purchased.                          actuarial liabilities created on account of the addi-
                                                      tional credit purchased.
You should contact the Retirement System for
additional information.                               Your employer and the Retirement System have
                                                      application forms which contain more information.
Service As A Member Of A Charter School.
You may purchase credit for service if you were       Parental Leave. If your membership service was
a permanent employee of a charter school whose        interrupted by one or more periods of parental or
Board elected not to participate in the Retirement    maternity leave, pregnancy, or childbirth, you may
System. You must have completed five years as         purchase credit for each separate period during
a contributing member after the charter school        which you lost at least one month of membership
employment. Your cost will be a lump sum payment      credit. The maximum amount of credit you may
equal to the full actuarial liabilities created on    purchase for each separate period is six months.
account of the additional credit purchased.           To be eligible, you must be a contributing member
                                                      at the time of purchase and have at least five years
Your employer and the Retirement System have
                                                      of service as a contributing member. Your cost
application forms which contain more information.
                                                      will be a lump sum payment equal to the full
Withdrawn University of North Carolina                actuarial liabilities created on account of the
Optional Retirement Program Service. You              additional credit purchased.
may purchase credit for periods of withdrawn
                                                      Your employer and the Retirement System have
University of North Carolina Optional Retirement
                                                      application forms which contain more information.
Program service, provided you are not receiving,
and are not entitled to receive, any retirement       Rollovers To Purchase Retirement
benefits resulting from this service. To purchase     Service Credit
this service, you must have completed five years of
service as a contributing member of this Retirement   Effective January 1, 2003, pre-tax money from an
System since your Optional Retirement Program         eligible retirement plan or an eligible IRA may be
service. Your cost will be a lump sum payment         accepted via rollover or in-service plan-to-plan
equal to the full actuarial liabilities created on    transfer to purchase creditable service. For further
account of the additional credit purchased.           information and instructions, please see Form 398,
                                                      “Using a Distribution of Tax-Sheltered Savings to
Your employer and the Retirement System have          Purchase Retirement Credit,” available from your
application forms which contain more information.     employer or the Retirement System’s Web site at
                                                      www.myncretirement.com.


 JANUARY, 2008                                                                 Your Retirement Benefits       17
                               TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     Transferring Service And Contributions
     Between Systems
     You can transfer your contributions and credit-            from the Consolidated Judicial and Legislative
     able service between this Retirement System and            Retirement Systems to this Retirement System.
     the Local Governmental Employees’ Retirement               Please contact the Retirement System for addi-
     System as long as you are an eligible member of            tional information and instructions.
     the System to which you are transferring; do not
     receive a refund of your contributions from the            NOTE: A transfer can affect your eligibility for
     System from which you are transferring; and, file a        retiree group coverage under the State Health Plan.
     Form 5TR which is available from the Retirement            Please see page 20 for further information.
     System or your employer.

     Creditable service transferred counts toward
     eligibility for monthly benefits and is used in
     computing the amount of your benefit. (See page
     5 concerning reciprocity.)

     Effective January 1, 2004, after completing five
     years of membership service in the Teachers’
     and State Employees’ Retirement System, you
     may transfer contributions and creditable service



     Refund Of Contributions
     If you leave the System for any reason other than          the employer contributions or any other benefit
     retirement or death, you can either:                       from the Retirement System. (See pages 20
                                                                through 23 for information about retiree medical
     n   receive a refund of your contributions (plus
                                                                benefits and taxation.)
         interest, if you have at least five years of service
         as a contributing member), or                          Interest
     n   leave your contributions in the System and keep        The interest credited on your contributions and
         all the creditable service you earned to that          paid with a refund is set by State law. The amount
         date. See page 5.                                      is 4% per year on your balance at the first of each
                                                                calendar year, compounded annually. Interest is a
     To receive a refund, simply complete a Form 5,
                                                                benefit to you only if you leave the System, get a
     “Withdrawing Your Retirement Service
                                                                refund, and qualify for an interest payment. The
     Credit and Contributions,” and file it with the
                                                                difference between the total investment earnings
     Retirement System. You can get the form from
                                                                on your contributions and the 4% paid with your
     your employer or the Retirement System’s Web
                                                                refund is kept by the System to help pay the cost
     site at www.myncretirement.com. State law does
                                                                of retirement benefits for career employees. If the
     not permit the Retirement System to make a
                                                                law allowed a higher rate of interest to be paid
     refund earlier than 60 days after your separation
                                                                with refunds, retirement benefits and other career
     from covered employment. Upon receipt of your
                                                                employee benefits would be lower.
     refund of contributions, you waive any rights to

18    Your Retirement Benefits                                                                 JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Applying For And Receiving Monthly Benefits
Retirement Application Process                           your retirement, your beneficiary will not be
Once you decide to retire and meet the eligibility       eligible for a monthly retirement allowance, based
requirements for monthly benefits, there are             on your retirement account, except as provided
certain steps which must be taken to begin the           under “Survivor’s Alternate Benefit” on page 6.
retirement process.
                                                         Upon receipt of your Form 6, “Claiming Your
Monthly retirement benefits are effective the            Monthly Retirement Benefit,” the Retirement
first day of any month; however, a retirement            System will send you an acknowledgement letter
application must be signed, dated, and filed at least    which will include instructions on your next steps
one day and not more than 120 days prior to the          in the retirement process. You will also be sent a:
effective date of retirement.
                                                         n   Form 170, “Authorizing Direct Deposit,” and
Approximately 90 to 120 days before your planned         n   Form HM, “Selecting Health Coverage
retirement date, you should complete a:                      Through the State Health Plan.”

n   Form 6, “Claiming Your Monthly Retirement            In addition, you will have an opportunity to elect
    Benefit.”                                            coverage under the optional $10,000 Contributory
                                                         Death Benefit for Retired Members. Your election
Please see the Guides on the Form 6 for additional       must be made within 60 days from the effective
detailed information about the retirement                date of your retirement. Information about the
process. This form is available from your                cost and coverage provisions will be sent to you
employer or the Retirement System’s Web site at          shortly after the Retirement System receives your
www.myncretirement.com.                                  retirement application.
If you contribute to the Retirement System               You will later receive an estimate of the maxi-
during the six months before your effective              mum allowance you can receive and the payment
date of retirement, your employer should                 options, if applicable. Along with the estimates,
complete the employer certification section              you will receive:
(Section H) on the Form 6, “Claiming Your
Monthly Retirement Benefit,” before the form             n   Form 6E, “Choosing Your Retirement Payment
is sent to the Retirement System.                            Option,” and
If you want an estimate under Option 4, you must
                                                         n   Form 290, “Choosing Income Tax Withholding
furnish the Retirement System with an estimate,              Preferences.”
obtained from the Social Security Administration,
                                                         Please note that the Retirement System will
of the Social Security benefit available to you at age
                                                         not be able to pay monthly retirement benefits
62. This estimate should be obtained within one
                                                         to you until we have received your properly
year prior to your effective date of retirement.
                                                         completed Form 6E.
You must terminate employment, live until the
                                                         Finally, you will be sent a:
effective date of retirement, and do no work for
a covered employer at any time during the six            n   Form 336, “Designating Beneficiary(ies) for the
months immediately following the effective date of
                                                             Guaranteed Refund as a Retiree.”
retirement in order to be legally retired. Generally,
if your death occurs before the effective date of


 JANUARY, 2008                                                                    Your Retirement Benefits     19
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     Please return completed forms directly to the            Post-Retirement Increases
     Retirement System.                                       Your benefit may be increased periodically after
     Your First Monthly Benefit                               retirement to help you keep up with the cost-
                                                              of-living. Increases depend on changes in the
     Your first monthly retirement benefit will be            Consumer Price Index, the availability of funds,
     mailed to you. Thereafter, it is the policy of the       and how much active working members of the
     Retirement Systems Division for your monthly             System receive in salary raises.
     payment to be directly deposited in your account
     when your financial institution opens for business       The cost-of-living increases granted are usually
     on the 25th day of each month, except in December,       figured as a percentage increase in your monthly
     when it will be deposited on the 20th. If the day        benefit. That percentage increase becomes a per-
     the Retirement System would normally make your           manent part of your monthly benefit, under all
     deposit is a Saturday, Sunday, or holiday, then your     payment plans, and the monthly benefit to be
     deposit will be made on the last workday before          paid to your beneficiary, after your death, under
     that Saturday, Sunday, or holiday. Direct deposit is     Options 2, 3, 6-2, and 6-3. (See page 11 regarding
     fast, is automatic, and is free of cost to you.          Option 4 increases.)


     Retiree Health Insurance Coverage
     When you retire, you are eligible to enroll in the       if you have 10 but less than 20 years of retirement
     State Health Plan, with the cost determined by when      service credit, you will have to pay 50% of the
     you began State employment and which health cov-         cost for your coverage, and with five but less than
     erage you select, if you contributed to the Teachers’    10 years, you will have to pay the full cost for your
     and State Employees’ Retirement System for at least      coverage. In all cases, the full cost of dependent
     five years (not including credit for unused sick leave   coverage, if elected, must be paid by you.
     or credit transferred from the Local Governmental
     Employees’ Retirement System) while employed as          As a retiree, when you or covered dependents
     a teacher or State employee.                             become eligible for Medicare, both Parts A
                                                              (Hospital) and B (Medical) must be elected in
     At the time you complete your retirement applica-        order to maintain the same level of coverage
     tion, be sure to complete an application to enroll       provided before retirement.
     in the retiree group of the State Health Plan.
                                                              For information on prescription drug coverage
     Under current law, if you were first hired prior         under the State Health Plan and Medicare Part
     to October 1, 2006, and retire with five or              D (Prescriptions), please contact the State Health
     more years of State System membership service,           Plan at 1-800-422-4658 or visit the State Health
     the State will pay either all or most of the             Plan Web site at www.shpnc.org.
     cost, depending on the plan chosen, for your
     individual coverage under one of the Preferred           Coverage under the retiree group of the State
     Provider Organization (PPO) plans. Based on the          Health Plan begins on the first day of the month
     conditions described above, if you were first hired      following the effective date of retirement. For
     on or after October 1, 2006, in order to receive         example, if your effective date of retirement is
     individual coverage at no cost, you must retire          January 1, 2008, your retiree group health cover-
     with 20 or more years of retirement service credit;      age will begin on February 1, 2008.


20    Your Retirement Benefits                                                                JANUARY, 2008
                       TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Income Tax
Benefits from the Retirement System receive spe-      Under federal law, the majority of each and every
cial income tax treatment. The following is a brief   retirement check is includable as taxable income
outline of current tax laws as they apply to System   on your federal tax Form 1040. This does not
benefits. However, tax laws often change. You         mean that you will pay tax again on the contribu-
should consult your tax advisor for more details.     tions on which you have already paid tax. It does
                                                      mean, however, that you may exclude only a small
Retirement Benefits                                   portion of your previously taxed contributions
Each year by January 31, a Form 1099-R (similar       each month throughout a period of time specified
to Form W-2, Statement of Income and Tax              by the federal government.
Withheld, that you received annually while you
were working) will be sent to you. Shown on the       The Retirement System computes the non-taxable
Form 1099-R are the amount of your retirement         portion of your monthly benefit by using the
benefits, the taxable portion (if any), the amount    Internal Revenue Service “Simplified General
of tax withheld (if any), and related informa-        Rule.” Under this method of computation, your
tion. Copies will also be sent to the Internal        “federal tax base” is divided by a specified number,
Revenue Service and North Carolina Department         based on your option and your age at retirement,
of Revenue. Therefore, you should report your         to determine the non-taxable amount of your
retirement benefits on your federal and North         monthly benefit.
Carolina tax returns regardless of whether you        In order to determine in advance the portion of
owe any income tax.                                   your monthly benefit that is not taxable, refer to
Federal Income Tax. Part of your retirement           the tables on the following page. Use Table 1 if
benefit may not be subject to federal income tax      you select the Maximum Allowance or Option 4;
because the tax was withheld while you were           use Table 2 if you choose Option 2, 3, 6-2, or 6-3.
working. Included in the non-taxable part of your     Based on your age at retirement for Table 1 or for
retirement benefits are contributions made by you     your and your beneficiaries combined age for Table 2,
before July 1, 1982, and any non-rollover service     determine the number of expected payments in
purchases made by you.                                column two opposite your age bracket. Divide the
                                                      number of expected payments into your “federal
All or part of your retirement benefit may be sub-    tax base” (as shown in
ject to federal income tax because it has not been    your Final Report of
taxed before. Included in the taxable part of your    Retirement Benefits).
retirement benefits are contributions made by you     The result is the amount
after July 1, 1982, any rollover service purchases,   of your monthly benefit
and all benefits paid by the employer contributions   that is not taxable.
and investment earnings.

When you retire, you will receive a statement that
shows the total amount of your retirement benefits
not subject to federal income tax. That figure will
be referred to as your “federal tax base.”




 JANUARY, 2008                                                                 Your Retirement Benefits       21
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




                                                           FOR EXAMPLE —
         Table 1 — For Maximum Allowance And Option 4
                                                           Options 2, 3, 6-2, And 6-3:
            Your Age       Number Of Expected Payments
          At Retirement       To Be Divided Into Your      If your “federal tax base” is $13,950 and your age
                                 Federal Tax Base          at retirement is 56 and your spouse’s age is 63,
                                                           you would divide $13,950 by 360 to obtain your
         55 and under                    360               non-taxable figure of $38.75 per month. Therefore
                                                           regardless of the post-retirement increases you
         over 55 to 60                   310               may receive in the future, $38.75 of your monthly
         over 60 to 65                   260               benefit would be exempt from federal income tax
                                                           for 360 months. If you fail to live 360 months,
         over 65 to 70                   210               the beneficiary to whom you have left a monthly
            over 70                      160               benefit, can claim the $38.75 monthly exclusion
                                                           for the balance of the 360 months. The amount of
                                                           your or your survivor’s monthly benefit in excess of
             Table 2 — For Options 2, 3, 6-2, And 6-3      $38.75 would be immediately includable for federal
                                                           income tax purposes, and after 360 months your
          Combined Age     Number Of Expected Payments
          At Retirement       To Be Divided Into Your      total monthly benefit would be includable.
                                 Federal Tax Base
                                                           The illustrations on this page are only examples.
                                                           Your non-taxable amount will be based on your
          110 and under                  410               age and the age of your survivor, if applicable,
         over 110 to 120                 360               at retirement and the amount of your “federal
                                                           tax base.”
         over 120 to 130                 310
                                                           North Carolina Income Tax. If you are a North
         over 130 to 140                 260
                                                           Carolina resident and have maintained five or more
            over 140                     210               years of retirement service credit as of August 12,
                                                           1989, your retirement benefit paid by this System
                                                           is not subject to North Carolina income tax. If you
     FOR EXAMPLE —                                         do not have five years of maintained retirement
     Maximum Allowance And Option 4:                       service credit as of August 12, 1989, you will be
     If your “federal tax base” is $13,950 and your        required to pay North Carolina income tax on the
     age at retirement is 60, you would divide $13,950     taxable portion of your retirement benefit. The
     by 310 to obtain your non-taxable figure of $45       amount of retirement benefits subject to North
     per month. Therefore, regardless of the post-         Carolina income tax is the same amount of retire-
     retirement increases you may receive in the future,   ment benefits on which federal income tax must be
     $45 of your monthly benefit would be exempt from      paid, less a $4,000 annual exclusion. If the taxable
     federal income tax for 310 months. The amount         portion of your annual retirement benefits is less
     of your monthly benefit in excess of $45 would        than $4,000, you will not owe any North Carolina
     be immediately includable for federal income tax      income tax on your retirement benefits.
     purposes, and after 310 months your total monthly
     benefit would be includable.



22    Your Retirement Benefits                                                             JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




If you are not a resident of North Carolina, you         portion of your refund will be withheld for
may not owe North Carolina income tax on your            federal income tax purposes. Withholding is
retirement benefits from this System. However,           mandatory unless the taxable portion of your
you may owe state income tax in the state in which       refund is directly rolled over.
you live. You should contact your tax advisor,
the North Carolina Department of Revenue,                In addition to income tax, you may owe a 10%
or the Department of Revenue in the state in             excise tax on the taxable portion of a refund which
which you live for specific information relative         is made prior to death, disability, or the attainment
to your situation. Our System can only withhold          of age 591/2. You can defer the income tax and
North Carolina income tax. We cannot withhold            avoid the 10% excise tax by rolling over the tax-
any other state’s income tax from your monthly           able portion of your refund to an IRA or another
benefit.                                                 qualified retirement plan. You should consult the
                                                         Internal Revenue Service, your attorney, or your
Death Benefits                                           accountant for specific information relative to
Your beneficiary pays no income tax on death ben-        your particular situation.
efits. They are treated as life insurance benefits for   North Carolina Income Tax. The amount of the
tax purposes.                                            refund subject to North Carolina income tax is the
Refunds                                                  amount of the refund on which federal income tax
                                                         must be paid, less a $4,000 exclusion. Refunds of
By January 31 of the year following the year of          retirement contributions paid by the Retirement
your refund, you will be sent a Form 1099-R              System to former employees who maintained five
showing the amount of your refund, the taxable           or more years of retirement service credit as of
portion, the amount of tax withheld (if any), and        August 12, 1989, are not subject to North Carolina
related information. Copies will also be sent to         income tax. Employees who do not have five
the Internal Revenue Service and North Carolina          years of maintained retirement service credit as
Department of Revenue.                                   of August 12, 1989, will be required to pay North
                                                         Carolina income tax on the taxable portion of
Federal Income Tax. You pay no federal income
                                                         their retirement benefits refunds. If the taxable
tax on the amount you contributed prior to July 1,
                                                         portion of your refund is less than $4,000 for
1982; however, the amount you contribute after
                                                         federal income tax purposes, you will not owe any
July 1, 1982, is subject to federal income tax. Also,
                                                         North Carolina income tax on your refund.
any interest earned by your contributions before
and after July 1, 1982, is subject to federal income
tax.

Federal income tax laws require withholding from
the taxable portion of your refund unless that
portion of your refund is directly rolled over to
an IRA or another qualified retirement plan that
will accept your rollover. If you do not elect to roll
over the taxable portion of your refund directly
to an IRA or another qualified retirement plan
that will accept your rollover, 20% of the taxable



 JANUARY, 2008                                                                    Your Retirement Benefits       23
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     Reemployment After Retirement
     After you have officially retired and are receiving      than three years, your first retirement benefit will
     monthly benefits, if you perform work in any capac-      be reinstated and you will have a choice of either
     ity for an employer under this Retirement System,        receiving a lump sum refund of contributions or
     you will be subject to the reemployment provisions       another (generally smaller) monthly benefit from
     described below. These provisions may require you        your second period of employment.
     to work under an earnings limitation or to reenroll
     as a contributing member of the Retirement System.       If you are reemployed on a part-time, interim,
     You will be subject to reemployment provisions           temporary, or contractual basis, or are otherwise
     based on the nature of the particular work you per-      engaged to perform services on any basis that does
     form for a covered employer, regardless of your job      not require membership in the Retirement System,
     classification or your technical employment status       your retirement payment will be stopped if your
     (which may include being assigned to work for a          earnings during the 12-month period immediately
     covered employer by a private company such as a          following the effective date of retirement or during
     temporary agency). If you retire with monthly early      any calendar year exceed your earnings limitation,
     or service retirement benefits from this System and      which is calculated as the greater of the following:
     are reemployed by an employer that participates in       n   $28,060, or
     this System, the following applies:
                                                              n   50% of your compensation, excluding termi-
     Reemployment After Receiving Early Or                        nation payments, reported to the Retirement
     Service Retirement Benefits. If you retired                  System during the 12 months of service preced-
     before November 1, 2005, with monthly early or               ing the effective date of your retirement.
     service retirement benefits from the System and
                                                              The above amounts are increased on January 1
     are reemployed by an employer that participates
                                                              each year by the percentage increase in the
     in the Teachers’ and State Employees’ Retirement
                                                              Consumer Price Index, which is a national measure
     System, the following applies:
                                                              of the increase in the cost of living from one year
     If you are reemployed in a position that requires        to the next.
     membership (see “Becoming A Member Of The
                                                              Your retirement payment will be stopped for the
     System” on page 2) in the Teachers’ and State
                                                              remainder of the calendar year on the first day
     Employees’ Retirement System, your retirement
                                                              of the month following the month in which your
     payment will be stopped on the first day of the
                                                              earnings exceed the greater of the two limits
     month following the month of reemployment and
                                                              stated above. Your retirement payment will start
     you will again become a contributing member in
                                                              again on January 1 of the year after your benefit
     the month in which you are restored to service.
                                                              is stopped. If your earnings exceed the allowable
     At any time you are reemployed and become a              amount in the month of December, your benefit
     member of the Retirement System again, your              will not be suspended.
     retirement benefits will be greater at the time
                                                              Reemployment which causes suspension of your
     of your second early/service retirement. If you
                                                              retirement allowance will also cause the suspen-
     return to service and contribute for at least three
                                                              sion of your health coverage under the retiree
     additional years, your service from your first and
                                                              group of the State Health Plan. Before accepting
     second periods of employment will be combined
                                                              such reemployment, you should ask the new
     and you can change the retirement payment plan
                                                              employer if you will qualify for continued coverage
     and/or beneficiary you selected at the time of your
                                                              under the active group of the State Health Plan,
     original retirement. If you return to service for less

24    Your Retirement Benefits                                                                JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




and if you will qualify for the State’s contribution   n   you are certified by the Department of Public
toward your coverage. Upon restoration of your             Instruction to teach exempt from the earnings
retirement allowance, your health coverage under           limitation.
the retiree group will be reinstated the first of
the month following the month your retirement          A return to work earlier than six months will
allowance is restored.                                 revoke your retirement benefit retroactively to
                                                       your retirement date and all benefits paid to
If you retire on or after November 1, 2005,            you must be repaid to the Retirement System.
in addition to the above provisions, the following     Activities such as substitute teaching and part-time
applies:                                               tutoring are not permitted during the six-month
                                                       period. Establishing a pre-existing agreement for
A six-month period during which no work is             post-retirement employment with an employer in
performed for an employer in the Teachers’             the Teachers’ and State Employees’ Retirement
and State Employees’ Retirement System must            System is prohibited and will cause retroactive
immediately precede a return to employment. A          revocation of retirement benefits, as well. Unless
return to work earlier than six months will revoke     legislation extends this reemployment exception
your retirement benefit retroactively to your          for classroom teachers, the above provisions are in
retirement date and all benefits paid to you must      effect through October 1, 2009.
be repaid to the Retirement System. Establishing
a pre-existing agreement for post-retirement           If you retired before November 1, 2005, dif-
employment with an employer in this System is          ferent provisions apply. Please see “Guidance on
prohibited and will cause retroactive revocation of    2005 Return to Work Law Changes” on our Web
retirement benefits, as well.                          site at www.myncretirement.com for additional
                                                       information.
For additional information, please see “Guidance
on 2005 Return to Work Law Changes” on our             Reemployment Effects on Health Coverage.
Web site at www.myncretirement.com.                    Effective July 1, 2007, reemployment with a State
                                                       System employer will cause you to be enrolled in
Reemployment Exception for Classroom                   the State Health Plan active group coverage if the
Teachers. If you retired on or after November 1,       position would require the employer to pay the
2005, but on or before October 1, 2007 with a          State’s contribution for your State Health Plan
reduced or unreduced benefit, or if you retire         coverage if you were not a retiree. Your active
after October 1, 2007 with an unreduced benefit,       group coverage will continue as long as you remain
and you wish to return to work as a classroom          in that position. Upon termination, you will return
teacher exempt from the earnings limitation, you       to State Health Plan retiree group coverage.
may do so provided you meet all of the following
conditions:                                            Reemployment After Receiving Disability
                                                       Payments. If you accept public or private employ-
n   you have a six-month separation from service       ment, contact the Retirement System for informa-
    immediately preceding your return to employ-       tion on provisions that apply to you.
    ment, during which time no work is performed
    for an employer in this System in any capacity,    Reemployment Under the Legislative or
                                                       Consolidated Judicial Retirement Systems.
n   you return to teach in a public school, in a       Please contact the Retirement Systems Division
    permanent position, at more than fifty-percent     for information on provisions that apply to you.
    time, and

 JANUARY, 2008                                                                 Your Retirement Benefits       25
                               TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM



     Important Information To Remember
     n   In all correspondence with the Retirement
         System, give your Member ID number or last
         four digits of your Social Security number.
         With more than 700,000 accounts and many
         duplicate names, it is essential that your inquiries
         be identified with this information.
     n   Keep your beneficiary designation up-to-date.
         Form 2C, “Designating Beneficiary(ies) for
         Retirement System Contributions and the
         Death Benefit,” is used for this purpose.
     n   No application, form, or other type of document
         can be effective until it has been received and
         accepted by the Retirement System.                     n   Your benefit from the Retirement System and
     n   At your request, the Retirement System                     your benefit from Social Security are not paid
         will gladly send you any form, application,                automatically — you or your beneficiary must
         or other information it has developed for                  apply for them.
         use by members. Please note that many of               n   If you become disabled, you should apply for
         our forms are available on our Web site at                 disability benefits from all available sources,
         www.myncretirement.com.                                    including the Disability Income Plan of North
     n   Any error concerning your retirement account               Carolina through your employer, and the Social
         should be brought to the attention of the                  Security Administration.
         Retirement System, in writing, immediately.            n   Effective July 1, 2007, if you are an elected
     n   If you are fully insured, you are guaranteed a             government official, you may forfeit your
         monthly retirement income for life from Social             right to a monthly benefit from this System if
         Security starting as early as age 62. Social               convicted of certain State or Federal offenses
         Security also provides medical benefits through            involving public corruption.
         Medicare starting at age 65. More information
         can be obtained from the Social Security
         Administration. Their toll-free telephone
         number is 1-800-772-1213.




26   Your Retirement Benefits                                                                  JANUARY, 2008
                                     TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM



Disability Income Plan Of North Carolina
Details On:........................................... Are On Page:                   Long-Term Disability Benefits.............................. 31
                                                                                         Eligibility.................................................................. 31
Covered Participants ............................................ 28                     Benefit Amount ........................................................ 31
   Termination Of Coverage ....................................... 28                    Salary Continuation During
   Who Pays For The Plan? ........................................ 28                    The Long-Term Period........................................... 32
   Claim Forms ............................................................ 28           Earnings and Trial Rehabilitation ........................... 33
What Constitutes Disability?................................ 28                          Duration Of Benefits ............................................... 33
Salary Continuation — (Waiting Period) ............. 29                               Other Disability Information ................................. 34
Short-Term Disability Benefits ............................. 29                          Post-Disability Benefit Increases ............................ 34
   Eligibility.................................................................. 29      Report Of Earnings ................................................. 34
   Benefit Amount ........................................................ 29            Income Tax ............................................................... 34
   Salary Continuation During                                                         Other Benefits And Restrictions .......................... 35
   The Short-Term Period .......................................... 30                   Accrual Of Service Credits ...................................... 35
   Earnings And Trial Rehabilitation .......................... 30                       Death Benefit ........................................................... 35
   Extended Short-Term Disability Benefits............... 30                             Survivor’s Alternate Benefit ..................................... 35
                                                                                         Health Insurance ..................................................... 35
                                                                                         Restrictions.............................................................. 35
                                                                                      Administration And Funding ................................ 36
                                                                                      How to Contact Us.................................................38




 JANUARY, 2008                                                                                                               Your Retirement Benefits                       27
                            TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM



     Covered Participants
     You are covered under the Disability Income Plan       Who Pays For The Plan?
     (the Plan) if you are (or become) a State teacher      If you meet these requirements, you will automati-
     or State employee and you are in service and a         cally become a participant of the Disability Income
     member of the Teachers’ and State Employees’           Plan of North Carolina. Your participation in the
     Retirement System or a participant of the              Plan is free to you as an eligible State teacher or
     University Optional Retirement Program.                State employee. Your employer will make the
                                                            necessary contributions on your behalf to provide
     Termination Of Coverage                                for your participation in the Plan.
     Your coverage under the Plan will cease upon:
                                                            Claim Forms
     n   the termination of your employment as a State
                                                            The appropriate forms to file for benefits are avail-
         teacher or State employee,
                                                            able through the Retirement Systems Division or
     n   your retirement under the provisions of the        your employer.
         Teachers’ and State Employees’ Retirement
         System or the University Optional Retirement
         Program,
     n   your becoming a beneficiary under the Plan,
         or
     n   your death.




     What Constitutes Disability?
     Disability under the Plan is the mental or physical    NOTE: The North Carolina General Assembly
     incapacity for the further performance of duty         passed legislation, effective August 1, 2007, which
     (the usual occupation) of a participant; provided      changes certain long-term disability provisions
     that such disability was not the result of terrorist   for any member who has less than five years of
     activity, active participation in a riot, committing   membership service as of July 31, 2007, but who
     or attempting to commit a felony, or an intentional    meets the requirements for long-term disability
     self-inflicted injury.                                 on or after August 1, 2007. Please see page 32 for
                                                            additional information.




28    Your Retirement Benefits                                                              JANUARY, 2008
                         TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM



Salary Continuation — (Waiting Period)
You are not entitled to receive any benefits from         During the waiting period, you may return to
the Plan for a period of 60 continuous calendar           service for trial rehabilitation for periods of not
days from the onset of disability. The 60-day             more than five continuous days of service. Such
waiting period is determined from the last actual         a return to service will not cause a new waiting
day of service, the day of the disabling event if the     period to begin but will extend the waiting period
disabling event occurred on a day other than a            by the number of days of the return to service.
normal workday, or the day succeeding at least 365        Trial rehabilitation during the waiting period is a
calendar days after service as a State teacher or State   return to service in any capacity.
employee, whichever is later. During this waiting
period you may be paid such continuation of
compensation by exhausting accumulated sick leave,
vacation leave, or some other salary continuation as
may be provided by your employer.




Short-Term Disability Benefits
Short-term disability benefits are payable after the      military service, you will be eligible for short-term
conclusion of the waiting period for a period not         disability benefits, provided all other requirements
exceeding 365 calendar days provided you meet             are met.
the following requirements.
                                                          Short-term disability benefits are paid by your
Eligibility                                               employer; therefore, you should contact your
You are eligible if:                                      employer to make application for benefits. The
                                                          determination of disability and eligibility for
n   you have at least one year of contributing            short-term benefits is made by your employer and
    membership service in the Retirement System           physician. In disputed cases, either you or your
    earned within the 36 calendar months preced-          employer may request a determination of disabil-
    ing your disability,                                  ity by the Plan’s Medical Review Board.
n   you are determined to be mentally or physically
    disabled for the further performance of your          Benefit Amount
    usual occupation,                                     The monthly short-term benefit will equal 50%
n   your disability was incurred at the time of active    of 1/12th of your annual base rate of compensation
    employment, and                                       last payable to you prior to the beginning of the
                                                          short-term benefit period (for teachers, annual base
n   your disability has been continuous.
                                                          rate of compensation includes any local supplement
Effective July 1, 2007, if your membership service        or coaches supplement) plus 50% of 1/12th of your
within the 36 calendar months immediately                 annual longevity payment, if any, to a maximum
preceding the date of disability was interrupted for      of $3,000 per month. The monthly benefit will be
                                                          reduced by any monthly payments you are entitled



 JANUARY, 2008                                                                     Your Retirement Benefits       29
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     to receive for Workers’ Compensation (excluding         Trial rehabilitation during the short-term period
     permanent partial Workers’ Compensation awards).        is defined as a return to service in the same capac-
     The monthly benefit will be further reduced by          ity that existed prior to the disability. Short-term
     any monthly payments from the federal Veterans          disability benefits cease upon a return to your
     Administration, any other federal agency, or pay-       usual occupation. If you return to service for
     ments made under the provisions of General Statutes     trial rehabilitation, a new waiting period will not
     section 127A-108 to which you may be entitled if        begin unless your return to service exceeds 40
     these payments are based on the same disability for     continuous days or a different disability occurs.
     which you are receiving Plan benefits.                  Any period of rehabilitative employment will not
                                                             extend the short-term disability period.
     For the first six months beginning the first of the
     month after the last month worked, any benefits         Extended Short-Term Disability Benefits
     payable under the Plan are subject to FICA (Social      Short-term disability benefits may be extended for
     Security) taxes. Payments made more than six            as many as 365 days beyond the short-term period
     months after the last calendar month you worked         in cases where the Plan’s Medical Review Board
     are not subject to FICA taxes.                          finds that the disability continues to be temporary
                                                             and is likely to end during the extended period.
     Salary Continuation
                                                             You must complete an application for extended
     During The Short-Term Period
                                                             short-term disability benefits and forward the
     In lieu of short-term disability benefits, you may      application and the appropriate medical documen-
     elect to continue to exhaust any accumulated sick       tation to the Retirement Systems Division.
     leave, vacation leave, or any other salary continu-
     ation as may be provided by your employer. Such
     an election will not extend the 365 days duration
     of the short-term benefit period. An election to
     receive salary continuation for any part of a given
     day is in lieu of any short-term benefit otherwise
     payable for that day. An election to receive a lump
     sum payout for vacation leave is treated as if you
     had exhausted the leave and is in lieu of any short-
     term benefit otherwise payable.

     Earnings And Trial Rehabilitation
     Earnings are permitted during the short-term
     disability period not to exceed the amount of the
     short-term benefit without causing a reduction in
     your benefit amount. If your earnings exceed the
     amount of the short-term benefit, your short-term
     benefit will be reduced on a dollar-for-dollar basis.




30    Your Retirement Benefits                                                               JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM



Long-Term Disability Benefits
Long-term disability benefits are payable after         The determination of disability and eligibility
the conclusion of the short-term disability period      for long-term benefits will be made by the Plan’s
or after salary continuation payments cease,            Medical Review Board. The Medical Review
whichever is later, for as long as you are              Board may not determine any person to be eligible
permanently disabled provided you meet the              for long-term benefits who is in receipt of any
requirements described below.                           payments on account of the same disability that
                                                        existed upon entrance into membership in the
Eligibility                                             Retirement System.
To be eligible:
                                                        Benefit Amount
n   you must have at least five years of contributing
                                                        If you had five or more years of membership
    membership service in the Retirement System
                                                        service as of July 31, 2007, the following applies:
    earned within the 96 calendar months prior to
    becoming disabled or upon cessation of contin-      During the first 36 months of the long-term
    uous salary continuation payments, whichever        disability period, the monthly long-term benefit
    is later,                                           will equal 65% of 1/12th of your annual base
n   you must make application to receive long-term      rate of compensation that was last payable to
    benefits within 180 days after the conclusion of    you prior to the beginning of the short-term
    the short-term disability period or after salary    benefit period (for teachers, annual base rate of
    continuation payments cease, or after monthly       compensation includes any local supplement or
    payments for Workers’ Compensation cease            coaches supplement) plus 65% of 1/12th of your
    (excluding monthly pay for permanent partial        annual longevity payment, if any, to a maximum
    benefits), whichever is later,                      of $3,900 per month. The monthly benefit will be
n   you must be certified by the Plan’s Medical         reduced by any monthly payments you are entitled
    Review Board to be mentally or physically           to receive for Workers’ Compensation (excluding
    disabled for the further performance of your        permanent partial Workers’ Compensation
    usual occupation,                                   awards) and by any primary Social Security
                                                        benefits you are entitled to receive including age
n   your disability must have been continuous, is
                                                        62 retirement Social Security benefits, regardless
    likely to be permanent, and was incurred at the
                                                        of whether you elect to receive these benefits.
    time of active employment,
                                                        The monthly benefit will be further reduced by
n   you must terminate employment as a permanent        any monthly payments from the federal Veterans
    full-time teacher or State employee, and            Administration, any other federal agency, or
n   you are not eligible to receive an unreduced        payments made under the provisions of General
    retirement benefit from the Teachers’ and State     Statutes section 127A-108 to which you may
    Employees’ Retirement System, or if you are a       be entitled if these payments are based on the
    participant of the Optional Retirement              same disability for which you are receiving Plan
    Program, you must not meet the age and              benefits. However, the benefit payable will be no
    service requirements to qualify for an unreduced    less than ten dollars ($10) a month.
    benefit from the Teachers’ and State Employees’
    Retirement System.                                  After the first 36 months of the long-term disability
                                                        period, the long-term benefit is calculated in the
                                                        same manner as described previously except that



 JANUARY, 2008                                                                   Your Retirement Benefits       31
                              TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     the benefit is reduced by an amount equal to a              disability, there will be no further payments
     primary Social Security disability benefit to which         from the Disability Income Plan unless you
     you might be entitled had you been awarded Social           have been approved for and in receipt of
     Security disability benefits.                               primary Social Security disability benefits.
                                                                 If your long-term benefit was suspended due
     If you had less than five years of membership               to your not being in receipt of a primary
     service as of July 31, 2007, and meet the                   Social Security benefit, it may be restored in
     requirements for long-term disability on or after           the event the Social Security Administration
     August 1, 2007, the following applies:                      grants retroactive approval for primary Social
                                                                 Security benefits with a benefit effective date
     n   Your long-term benefit shall be reduced during          within the first 36 months of the long-term
         the first 36 months of the long-term disabil-           disability period. In this event, the long-term
         ity period by an amount equal to the primary            disability benefit shall be restored retroactively
         Social Security retirement benefit to which you         to the date the benefit was suspended.
         might be entitled should you become age 62
         during the first 36 months.                          If you have applied and been approved for long-term
     n   After 36 months of long-term disability, there       disability benefits, you may make an irrevocable
         will be no further payments from the Disability      election to forfeit the long-term disability benefit,
         Income Plan unless you have been approved for        including any ancillary benefits, and retire on
         and are in receipt of primary Social Security        an early service retirement allowance, or receive
         disability benefits.                                 a return of accumulated contributions from the
                                                              Retirement System. Any such election must be
     n   The benefit will be payable so long as you
                                                              made within 90 days from the date of notification
         remain disabled and are in receipt of a primary
                                                              of the approval for long-term disability benefits
         Social Security disability benefit until you are
                                                              and prior to your receipt of any long-term disability
         eligible for an unreduced service retirement
                                                              benefit payments.
         benefit.
     n   If your long-term benefit is suspended due           Salary Continuation During The
         to your not being in receipt of a primary            Long-Term Period
         Social Security disability benefit, it may be        In lieu of long-term disability benefits, you may
         restored in the event the Social Security            elect to continue to exhaust any accumulated
         Administration grants retroactive approval for       sick leave, vacation leave, or any other salary
         primary Social Security disability benefits with
         a benefit effective date within the first 36
         months of the long-term disability period. In
         this event, the long-term disability benefit shall
         be restored retroactively to the date the benefit
         was suspended.

     n   If you are a member under the Optional
         Retirement Program and meet all eligibility
         requirements to receive long-term benefits,
         you shall be eligible to receive benefits for
         36 months. After 36 months of long-term


32    Your Retirement Benefits                                                                JANUARY, 2008
                         TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




continuation as provided by your employer. Such          n   your return to service was not longer than 36
an election will not extend the first 36 consecutive         continuous months, and
months of the long-term disability period. An            n   the Plan’s Medical Review Board certifies that
election to receive salary continuation for any part         you are disabled according to the laws that were
of a given day is in lieu of any long-term benefit           in effect at the time of your original approval
otherwise payable for that day. An election to               for long-term disability.
receive a lump sum payment for vacation leave is
treated as if you had exhausted the leave and is in      If the trial rehabilitation period exceeds 36
lieu of any long-term benefit otherwise payable.         continuous months, you will again become a
                                                         contributing member of the Retirement System;
Earnings and Trial Rehabilitation                        any subsequent disability will be treated as a new
Earnings do not affect the amount of your long-          condition requiring a new waiting period and a
term disability benefit if you do not exceed the         new short-term disability period.
amount of the difference between your net long-
term disability benefit and the compensation you         If you had less than five years of membership
were earning when you became disabled. If your           service as of July 31, 2007, and meet the
earnings exceed this difference, your long-term          requirements for long-term disability on or
benefit will be reduced on a dollar-for-dollar basis.    after August 1, 2007, the following applies:
                                                         If you are unable to continue in service during
During periods of trial rehabilitation, your long-       trial rehabilitation, and your long-term benefit
term disability benefits will be suspended. You          is restored, you shall continue to receive the
meet the definition of being in trial rehabilitation     benefit as long as you remain disabled until you
during the long-term disability period when:             receive a total of 36 long-term disability payments.
                                                         Continuation of the long-term disability benefit
n   from July 1, 2002 to July 31, 2007, you return       payments beyond 36 months shall be dependent
    to service in the same capacity that existed prior   upon approval for primary Social Security
    to your disability, or                               disability benefits.
n   on or after August 1, 2007, you return               Duration Of Benefits
    to service in any capacity with any employer
    participating in the Teachers’ and State             When you reach the age and/or service requirements
    Employees’ Retirement System, provided               to qualify for an unreduced service retirement
    your salary earned is equal to or greater            allowance from the Retirement System, your long-
    than the salary on which your long-term              term benefits will cease and you will commence a
    benefit is based.                                    service retirement under the Retirement System. If
                                                         you were a participant of the Optional Retirement
If you are unable to continue with reemployment          Program, you will receive long-term benefits
because of the same disability or a new disabling        until the time you would have qualified for an
condition, you may be entitled to a restoration          unreduced service retirement allowance from the
of your long-term disability benefit without a           Retirement System had you not elected to be a
waiting period or new short-term disability period       participant of the Optional Retirement Program.
when the following conditions are met:




 JANUARY, 2008                                                                    Your Retirement Benefits      33
                             TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM



     Other Disability Information
     Post-Disability Benefit Increases                       Income Tax
     Post-disability benefit increases may be granted by     Benefits from the Plan
     the General Assembly by increasing the compen-          are subject to federal
     sation upon which your short-term or long-term          income tax. Benefits
     disability benefit is calculated. Your benefit will     paid to employees
     be reduced by any increases in Social Security          who have maintained
     benefits, if applicable.                                five or more years
                                                             of service as of
     Report Of Earnings                                      August 12, 1989, are
     Persons in receipt of benefits under the Plan must      not subject to North
     annually report earnings to the Plan by completing      Carolina income tax.
     a “Statement of Income” form which is annually          Employees who do
     mailed to each Plan recipient. The Plan may require     not have five years of
     other statements of earnings as are necessary. If you   maintained retirement
     exceed the allowable earnings limitations, you must     service credit as of August 12, 1989, will be required
     notify the Plan by the fifth of the month following     to pay North Carolina income tax on their benefits.
     the month in which the earnings were received           For further information regarding the taxation of
     of the amount of the excess earnings. Failure to        these benefits, you should contact the Internal
     report excess earnings may result in a suspension       Revenue Service, the North Carolina Department
     or termination of benefits.                             of Revenue, your attorney, or your accountant.




34    Your Retirement Benefits                                                                JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Other Benefits And Restrictions
Accrual Of Service Credits                              n   reaching age 60 with five years of membership
While you are receiving benefits under the Plan,            service (age 55 with five years of membership
you earn creditable service in the Retirement               service as a law enforcement officer),
System for each month you are eligible and paid         n   completing 20 years of creditable service regard-
a benefit under the Plan. Creditable service is             less of age, or
not earned if you are in service and earning            n   reaching age 50 with 15 years of creditable
creditable service for the same month in any State-         service as a law enforcement officer.
administered retirement system, or if you were a
participant of the Optional Retirement Program.         The beneficiary named to receive a refund of your
For purposes of calculating a retirement benefit        contributions and interest under the Retirement
under the Retirement System, your average final         System (provided you have named only one
compensation will be determined as the higher           principal beneficiary who is living at the time
of your actual compensation or the compensation         of your death) may choose to receive a monthly
used in calculating benefits under the Plan as          benefit for life instead of a refund. If you have
adjusted for increases in post-disability benefits.     named two or more persons or your estate as
                                                        principal beneficiary, the Survivor’s Alternate
Death Benefit                                           Benefit does not apply. The benefit equals the same
A person in receipt of benefits under the Plan is       monthly amount you would have been entitled to
considered to be in service and covered under the       under Option 2 (100% Joint and Survivor) had you
Death Benefit Plan. The payment is equal to the         retired on the first of the month following your
highest 12 months of salary during the 24 months        death. If you do not want your beneficiary to have
preceding your death or the compensation used in        this choice, you should so indicate, in writing, to
calculating benefits under this Plan as adjusted for    the Retirement System.
percentage increases in post-disability benefits, but
                                                        Health Insurance
no less than $25,000 and no more than $50,000.
To be eligible, your death must occur after one         You are eligible for coverage under the State
year of contributing membership service in the          Health Plan while you are in receipt of benefits
Retirement System. This death benefit does not          under the Plan provided you have at least five
apply to persons in receipt of benefits who were        years of retirement membership service. If you
participants of the Optional Retirement Program         do not meet the retirement membership service
or persons in receipt of long-term benefits due to      requirement, you may continue coverage by paying
the transition rules.                                   the full premium. See page 20 for additional
                                                        information regarding health coverage.
Survivor’s Alternate Benefit
                                                        Restrictions
A person in receipt of benefits under the Plan, who
is a member of the Teachers’ and State Employees’       A person in receipt of benefits from the Plan is
Retirement System, is considered to be in service       not permitted to receive a refund of accumulated
and covered by the Survivor’s Alternate Benefit         contributions or to commence retirement benefits
under the Retirement System provided the person         from the Retirement System.
meets the age and/or service requirements as
follows:




 JANUARY, 2008                                                                   Your Retirement Benefits       35
                            TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     Administration And Funding
     Administration                                        Medical Review Board
     The Retirement System is administered by the          The Medical Review Board determines eligibility
     Board of Trustees. The Board members are:             for disability benefits. The members of the Board
                    Richard H. Moore,                      are:
                State Treasurer, Chairman                              Dr. George S. Edwards, Sr.
                                                                        Dr. Robert H. Fleming
                      June Atkinson                                      Dr. Ernest B. Page, Jr.
                  Norwood G. Clark, Jr.                                    Dr. Bobby Sellers
                     Joyce H. Elliott                                  Dr. Nathaniel L. Sparrow
                     Mark L. Foster
                  Alfred J. Hackney, Jr.                   Future Of The System
                    Shirley E. Harris                      The State expects to continue the System indefi-
                       Scott Hunter                        nitely. However, because future conditions cannot
                     Harold T. Keen                        be foreseen, the State General Assembly reserves
                   Timothy H. Keever                       the right to modify the provisions of the System.
                    Allen C. Meadors
                      Mark Roberts                         System Documents
                   Paschal W. Swann
                                                           This booklet summarizes the main features of the
                    Gloria Upperman
                                                           Teachers’ and State Employees’ Retirement System
                                                           of North Carolina. The official text governing the
     System Assets
                                                           operations of the System and the payment of all
     The State Treasurer is the custodian of the Plan      benefits is found in Chapter 135 of the General
     assets and serves as the Chief Investment Officer.    Statutes and Title 20 of the North Carolina
                                                           Administrative Code.
     Equity assets (i.e., common stock, preferred stock,
     and debentures convertible into common stock)         Funded Status
     are invested in conjunction with policies adopted
                                                           The Retirement System has been labeled as
     by the Investment Advisory Committee. The
                                                           “actuarially sound” because of the consistent use
     Committee members are:
                                                           over the years of:
                    Richard H. Moore,
                State Treasurer, Chairman                  n   actuarial assumptions based on experience,
                                                           n   an approved actuarial funding method, and
                  Norwood G. Clark, Jr.                    n   the recognition of all promised benefits in the
                    Leigh Hammond                              actuarial liabilities.
                     Steve Nelson
                   Paschal W. Swann




36    Your Retirement Benefits                                                            JANUARY, 2008
                        TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




Funded Ratio                                             Member Contributions
A generally accepted measure of the soundness of         Members contribute 6% of gross salary each
any retirement system is to relate the total assets      month to the System.
to the total accrued liabilities. This determines the
funded ratio or percentage of the System.                Employer Contributions
                                                         For the 2007-2008 fiscal year, employers contribute
The total of the accrued liabilities is found by         7.83% of the gross payroll of members each month
adding the total assets and the unfunded accrued         to the System for benefits.
liabilities. Shown are the assets and unfunded
liabilities for the past several years, as of December
31 of each year. Beside the figures is a graph which
shows the funded ratio of the Retirement System
(the percentage of the assets to the total accrued
liabilities).

              Assets          Unfunded Accrued
                                  Liabilities
                                                           %
2006      $52,420,807,724        $(3,028,900,728)        Funded

2005      $49,670,182,206        $(3,045,514,417)        120                  Funded Ratio

2004      $47,383,509,397        $(3,555,655,121)        110
                                                                         112% 111%
                                                                  110%               108% 108% 108%
2003      $45,117,507,733        $(3,383,806,385)                                                     106% 106%
                                                         100
2002      $43,226,837,217        $(3,362,853,828)
                                                          90
2001      $42,104,086,026        $(4,390,422,826)
2000      $39,773,747,165        $(4,524,977,179)         80
1999      $36,119,250,376        $(3,332,142,109)         70

                                                          60

                                                          50

                                                          40

                                                          30

                                                          20

                                                          10

                                                            0
                                                                  ’99 ’00 ’01        ’02 ’03 ’04 ’05       ’06




 JANUARY, 2008                                                                       Your Retirement Benefits     37
                            TEACHERS' AND STATE EMPLOYEES' RETIREMENT SYSTEM




     How To Contact Us
     System Internet Address                                System Telephone Number
     www.myncretirement.com                                 1-877-627-3287
                                                            (toll-free outside of Raleigh area)
     Visit our Internet Web site to learn more about the
     benefits that are available to you:                    919-807-3050
                                                            (within local calling distance of Raleigh)
     n   download and complete applications and forms
         used by the Retirement System,                     Due to the large volume of calls that are received
     n   download and view Your Retirement Benefits         in the Member Services Section, we recommend
         handbooks,                                         that you do not call during the following times:
     n   review “Frequently Asked Questions,” and           n   Mondays,
     n   manage your retirement account online using        n   other days between the hours of noon and
         our ORBIT (Online Retirement Benefits                  2:00 p.m., and
         through Integrated Technology) System. You
                                                            n   the day following the mailing of monthly
         can view your account information, request
                                                                retirement checks.
         customized benefit estimates, make edits to
         your personal information, and much more.          If you believe that the nature of your inquiry will
                                                            result in a lengthy conversation or will require
     These are some of the options that are currently
                                                            research by our staff, we recommend that you
     available to you on our Internet Web site. Please
                                                            submit your questions in writing and we will
     feel free to visit and use this site whenever it may
                                                            respond accordingly.
     be of assistance to you.
                                                            NOTE: The Retirement System provides members
     System E-Mail
                                                            who wish to visit our office with one-on-one and
     nc.retirement@nctreasurer.com                          group consultations by appointment only. Please
                                                            call or e-mail our office to schedule an appointment.
     System Address
     The address of the Retirement System is:

     Teachers’ and State Employees’
     Retirement System
     Department of State Treasurer
     Albemarle Building
     325 North Salisbury Street
     Raleigh, North Carolina 27603-1385




38    Your Retirement Benefits                                                              JANUARY, 2008

				
DOCUMENT INFO
Description: North Carolina State Employees Retirement Plan document sample